The hardware requirements for Windows Phone 8 are stricter than those for its predecessor, demanding a dual-core processor and support for near-field communication (NFC). Those features would be difficult to add to more entry-level and mid-level phones, according to the sources, prompting the need for less pricey Windows Phone 7.5 devices.

A Nokia spokesman told CNET that the company does not comment on rumors or speculation.

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Last week Nokia unveiled its upcoming Windows Phone 8 devices, including the Lumia 920. Considered the new flagship phone, the Lumia 920 offers a host of features courtesy of the new OS, such as wireless charging and NFC.

The company got into a bit of hot water this summer when it announced that owners of current Lumia devices would not be able to upgrade to Windows Phone 8. The only option available is an upgrade to Windows Phone 7.8, which provides the new new Start screen but little else from the new operating system.

Nokia Vice President Kevin Shields has promised that the company will keep investing in Windows Phone 7 and that developers will continue to build apps for both version 7 and version 8 of the OS, DigiTimes added. And in another one of its Conversations blogs, Nokia also said it would keep the updates flowing for its current lineup of Windows Phone 7 devices.